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August 17, 2022updated 16 Mar 2023 11:23am

What Race to Zero’s new guidelines mean for Gfanz

Gfanz is in talks with Race to Zero about how to implement its updated requirements, but many questions remain.

By Polly Bindman

Gfanz, Race to Zero, fossil fuels
Mark Carney, joint chair of Gfanz, has welcomed new guidelines that intend to force alliance members out of unabated fossil fuels. (Photo by Peter Summers – WPA Pool/Getty Images)
  • Updated Race to Zero guidelines could yield a huge challenge to Glasgow Financial Alliance for Net Zero (Gfanz) members, with environmental groups arguing they will need to tighten their fossil fuel exposure to meet its minimum criteria.
  • Different interpretations of Race to Zero’s guidelines make it hard to tell whether or not Gfanz must require members to set tighter rules on fossil fuels in order to remain a part of the group.
  • Representatives for Gfanz tell Capital Monitor it’s unlikely the alliances that make up the group will update their rules because “much of the expanded requirements are already explicit or at a minimum implicit” within existing frameworks.

On 8 August, the chairs of the Glasgow Financial Alliance for Net Zero (Gfanz) – Mark Carney, Michael Bloomberg and Mary Schapiro – released a statement welcoming the UN Race to Zero’s new minimum criteria requiring associated members to get out of all unabated fossil fuels.

The chairs were referencing a June update from Race to Zero, an influential coalition promoting net zero and representing 1,049 cities, 67 regions, 5,235 businesses, 441 investors and 1,039 higher education institutions convened by the UN Framework Convention on Climate Change’s Climate Champions.

Race to Zero provides accreditation to Gfanz, the umbrella group for the seven net-zero initiatives for financial institutions. While its updated criteria came into force in the middle of June this year, new applicants, existing partners and members have been told they have one year to bring them into force. Gfanz has more than 450 members representing approximately $130trn in assets.

Along with its minimum requirement for members to eventually phase out of unabated fossil fuels, Race to Zero’s accompanying interpretation guide, published by its Expert Peer Review Group (EPRG), states members should account for all investees and clients’ underlying Scope 3 emissions (those created by a company’s activities but over which it has no direct ownership or control), set targets based on absolute rather than intensity emissions metrics, and publish transition plans to show how they will meet these commitments. This would include laying out what actions they will take within the following 12 months, two to three years and by 2030.

Crucially, the interpretation document says Race to Zero members should: “Restrict the development, financing and facilitation of new fossil fuel assets in line with appropriate scenarios… Across all scenarios, this includes no new coal projects.”

Non-governmental organisations (NGOs) and environment groups have praised the updates for including “much more detail” on how institutions, including Gfanz signatories, must achieve a 50% reduction in emissions by 2030.

Reclaim Finance, for example, wrote that Gfanz must now “pick up the gauntlet and ensure that all its members align with the new Race to Zero targets and expectations”.

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To close the “yawning gap between the level of ambition in their current guidelines” and Race to Zero’s criteria, Gfanz members “will need to upgrade their guidelines and policies on fossil fuel expansion and Scope 3 emissions”, Reclaim Finance concludes.

Cursory analysis would indicate that very few institutions are presently in line with Race to Zero’s requirement to end all financing activities for new coal.

Capital Monitor’s analysis of the coal policies of 249 of the world’s largest banks, asset owners and asset managers that are also Gfanz members finds that 160 (64%) have at least one coal restriction in place.

Using Reclaim Finance’s coal policy tool as a guide, just one in four (62) have any policies restricting coal developers – those producing new coal plants or mining infrastructure.

New rules already implicit

Beyond challenging requirements, a potential snag for advocates of Race to Zero’s new minimum criteria is what influence it has on the seven alliances that make up the overarching Gfanz group. Questions have been raised as to whether the alliances will be expected to officially toe the line.

Remco Fischer, climate lead for the UN Environment Programme Finance Initiative, which convenes three of the seven alliances – the Net-Zero Banking Alliance (NZBA) and the Net-Zero Insurance Alliance (NZIA), and the Net-Zero Asset Owner Alliance (NZAOA) in cooperation with the Principles for Responsible Investment (PRI) – tells Capital Monitor it is unlikely that the individual alliances will need to update their core commitments to meet Race to Zero’s new rules.

When it comes to enforcing compliance, Fischer explains this is an internal policy matter that each alliance will address according to their own governance processes.

As participating initiatives have until June 2023, Fischer says that should internal assessments find further alignment is required between an alliance’s internal commitment and the criteria, the decision on how to fully align will need to go through the governance processes of that alliance and will then need to be deemed as sufficient by the Race to Zero’s EPRG.

However, he adds that none of the alliances he represents anticipate amending their core commitments, governance documents or protocols on decarbonisation target-setting “because much of the expanded requirements are already explicit or, at a minimum, implicit within the alliances’ existing frameworks”.

Separately, Joseph Cockerline, communications specialist at the PRI, which convenes another of the Gfanz alliances, the Net Zero Asset Managers’ initiative (NZAMi), says the "network partners supporting the [NZAMi] are in direct, ongoing discussion with Race to Zero and the EPRG” on the new criteria and implementation guide.

Existing overlap

Fischer points to existing "overlap" between the Race to Zero’s new criteria and the current rules for Gfanz members. For example, the NZAOA states asset owners must "support the phase-out of fossil fuels required by 1.5°C scenarios" by not providing new finance to infrastructure assets "whose purpose or emissions cannot be aligned with the alliance’s net-zero ambitions".

For asset managers, there appears to be more leeway. The NZAMi mandates that members must follow target-setting guidelines in line with one of three scenarios: the Paris Aligned Investment Initiative’s (another one of the Gfanz alliances) Net Zero Investment Framework (PAII NZIF), the Science-Based Targets initiative (SBTi) for financial institutions, or the NZAOA Target Setting Protocol.

While the SBTi has the strictest rules on fossil fuels, requiring signatories to implement a ‘no coal’ policy within six months of having their target approved, NZAMi members can opt to follow one of the other, less stringent, approaches, such as the PAII NZIF, which only ‘recommends’ investors not to allocate additional capital to companies planning or constructing new coal projects or infrastructure.

Binding, or just guidance?

Further confusion around how and when Gfanz members will update their rules in line with Race to Zero centres on which aspects are binding.

For example, while NGOs including BankTrack, along with Mark Carney himself, have referred to statements in the interpretation guide as part of the new criteria, Fischer tells Capital Monitor when “we talk of minimum criteria, we are referring specifically to the starting line criteria, which are delineated in the official documents”.

While the starting line criteria states the need to phase down and out unabated fossil fuels it makes no mention of coal projects, nor the underlying Scope 3 emissions of investee companies. This distinction could prove important down the line.

That Gfanz may not rule out coal explicitly is unsurprising, given the political backlash against ESG investing intensifying in the US.

On the 10 August, for example, 19 Republican state attorney generals wrote a letter to BlackRock, suggesting that by investing state pension fund assets in ESG investments, the asset manager is acting against its fiduciary duties to clients. The letter also described BlackRock’s move away from fossil fuels under Gfanz as threatening national energy security.

Such pushback is only likely to increase, and as such, the composite alliances under Gfanz may have a hard time convincing members that it is better to move beyond fossil fuels than lose their place in the alliance.

Capital Monitor is hosting the Webinar series, Making Sense of Net Zero. Find out more information on

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